Cover Story: Special Report
It just may be a computer maker's dream come true--the Internet. Suddenly, computer-industry executives have grasped that the Net is a lot more than just the world's biggest E-mail system or a place where computer jocks can get their jollies. The Net, they've come to realize, could very well be the IBM Personal Computer all over again--a powerful, low-cost, open, standards-based technology "platform" upon which to build all sorts of new products, strategies, companies, markets, and even a few fortunes. Like the PC, this global network stands to reshape the business model of the entire industry. "This is a rocket that has been launched," says Eric E. Schmidt, chief technology officer at workstation maker Sun Microsystems Inc. "There's no one who can stop it. The future of computing is defined by the Net."
Indeed, thanks to a powerful new software scheme called the World Wide Web, the Internet is beginning to eclipse--more accurately, to subsume--the PC. The Internet will soon be so ubiquitous, or "transparent," as experts say, that we'll take it for granted, as we do electrical power or the phone system today. The grand vision now sparking imaginations and business plans throughout the computer industry is that by 2000, all major software programs will be "aware" of the Net and depend on it for a continuous stream of new data and updated functions. Less and less will you have to make a conscious decision to "get on the Internet," as you do today. Whenever it needs to, your PC will reach into the Web for a piece of data, a movie clip, or even a new program.
"IT PERVADES EVERYTHING." Such a universal network is the fulfillment of a long-cherished dream of computer scientists. In the early days of computing, "dumb" terminals could connect to a single mainframe or minicomputer, which let them share large amounts of data and computing power--but only if they could speak the digital lingo of that system. Another problem: Terminals were expensive and so were the phone connections. The PC caused a revolution with its low-cost computing power, but it isolated people from large pools of data and from one another. Local-area networks have helped, but they're limited in size.
The Net, it now seems, will take computing to a new plane--where information and computing resources from all over the world will be at your fingertips. If what's needed isn't in the disk on your desktop machine or the server down the hall, the next place your PC will look is on the Web. The boundary between your computer's contents and the rest of cyberspace will be almost imperceptible. Leading-edge customers, such as Federal Express Corp., are already taking advantage of that Web capability. Clients can now contact the shipper's IBM mainframe via the Web and check on the status of their shipments. Says Alvin Tedjamulia, senior director of research and strategy planning at network software maker Novell Corp.: "We want to eliminate the difference, from the user's point of view, of where any particular document is--inside General Motors, in the Library of Congress, or on the Web."
As the throbbing new center of the computing universe, the Net is quickly drawing the brightest technical talent, the most ambitious entrepreneurs, the sharpest marketers, and the savviest managers. "Everyone's so excited right now. They're all wondering, `How do we make use of this giant thing that has tentacles everywhere?"' says Jay A. Batson, senior analyst at Forrester Research Inc., a consulting firm in Cambridge, Mass. "It's a very high priority at Apple," says Larry Tesler, the PC maker's chief scientist. "It pervades everything."
The Net "represents a fundamentally new product opportunity that's actually more exciting than the IBM PC," enthuses James W. Breyer, general partner at Accel Partners, a Silicon Valley venture-capital firm. "With the PC, there were some standard distribution models you could apply. With the Internet, business models are simply virgin territory, which means there's a wonderful opportunity for entrepreneurs to apply their creativity."
And, many industry executives believe, it's a splendid chance to change the rules of the game--so that software goliath Microsoft Corp. wields less power. While Microsoft controls the key software standards of the computer industry now, the Net is not owned or controlled by any particular company or interest. The Internet business is a fresh field of dreams in which even small companies can pioneer new technologies, set new standards, and grow rich.
The Internet has already grown so large--some 30 million people are now connected to it--that the industry giants couldn't fight it if they wanted to. Rather, they are figuring out how to play the Internet market. IBM, for example, already has made Internet access a feature of its OS/2 Warp operating system and Microsoft will do so with Windows 95, due out in August. Apple also is said to be working on Internet links, including providing access through its eWorld online service. But those companies are Johnny-come-latelies compared with the likes of Digital Equipment Corp. and Sun Microsystems, which began supplying Internet technology years before the Net fad exploded.
Most likely the Internet era won't be marked by the kind of dominance that Microsoft enjoys now or IBM did in the mainframe era. By conscious design, it is open to nearly infinite geographical expansion, to any brand or type of computer, and to virtually any use that engineers can think of. Basically the Net is just a few protocols, or communications rules, that govern some fundamental interactions between computers. Like the PC's MS-DOS operating system, which allows almost any word-processing package to run on any PC clone, the Internet protocols allow every make and model of computer to swap E-mail and other files. As long as a computer talks the Internet talk, it doesn't matter what kind of chips it uses, what software it runs, or whether a user types Swahili or Spanish: The message will get through.
The great flexibility of this setup is what's enabling the Internet to grow like Topsy, with hardly any central management or a blueprint for the future. Every month, the Net population grows by 10% to 15%. The Web, estimates Sun's Schmidt, is doubling every 53 days. By 2000, experts say, the Net will have as many as 100 million servers--computers that store volumes of information and dish it out to so-called clients, usually PCs.
The Internet has more than numbers on its side. Its open protocols are an invitation for anybody anywhere--from giants such as IBM and Apple to your nerdy neighbor--to create things that attach to the Net, making it a hothouse for all kinds of innovation. Whether it's linking a multimillion-dollar IBM mainframe to the Net or a way to help a client PC get around the Net faster, the Internet is daily absorbing every improvement in computer hardware performance and every new software idea that hits the market--with no disruption.
There's hardly any product or service that has been dreamed of for the still-unbuilt Information Superhighway that isn't getting developed for or actually delivered over the Internet today. The only limit seems to be engineers' imaginations. For example, an Israeli company called VocalTec has just delivered a $49 software package that melds the power of high-end PCs with a relatively old Internet protocol to create something entirely lew: live, long-distance, and practically zero-cost voice-messaging across the Internet. The voice links aren't good enough yet to replace standard telephone service, but who knows? The quality can only improve as the Net's circuits and computers grow faster by leaps and bounds.
PERFECT BINDING. In the past year, the great focus of innovation has been the World Wide Web. Based on a new set of protocols, the Web is helping the Internet deliver all the "multimedia" pizzazz that PCs are capable of--stylish typography, colorful graphics, push-button interactivity, and even sound and video. Again, a key public protocol, called HTML (hypertext markup language), makes it easy to combine and "publish" those complex types of data without caring what computers people might use to view it. This universality has made the Web so popular that HTML is spilling over into other forms of electronic publishing, including CD-ROMs and commercial online computing services.
Equally important, though, the Web adds much-needed structure to the Net, allowing mere mortals to navigate its fragmented resources. In addition to HTML, the Web supplies a standard method for giving a unique name to each of the zillions of digital "objects"--documents, video clips, directories, and electronic malls, to name just a few--that people are creating in cyberspace. Clicking on highlighted words or buttons on a Web "page" lets you "hyperlink" to related pages where you might find additional information, a program waiting for you to give it data, or still more links to other points on the Web. At no time, however, do you need to know or care where any of this information is physically stored. The Web fosters the illusion that all of the Net's computers have been stitched into one, with their myriad resources ready for you to tap.
The folks who can build new products and services on this mesh of cooperating computers are, potentially, the leaders of the computer industry a decade from now. Which explains the flood of Internet startups. At Accel, Breyer says, 90% of all companies in its $350 million-plus portfolio are making the Web a strategic component of their product or services. A year ago, Accel was reviewing perhaps one Net-related startup plan every week. Today, it is 10 to 20--everything from multiplayer computer gaming services to "digital cash" schemes for online shopping. Michael K. Parekh, online computer-services analyst at Goldman, Sachs & Co., predicts the total Internet market--including software, hardware, and services--will hit $4.2 billion by 1997.
But the strategic shift--and opportunity--that the Internet represents is far more important than the short-term revenues. The big names such as IBM, DEC, Apple, Sun, and Microsoft are all building Net-centered strategies--not because they want to fight over a few billion dollars, but because they need to stake out their futures in the $300 billion computer business. "We believe this is a very significant business for Digital," says Rose Ann Giordano, vice-president of DEC's Internet business group. "And I'm not just talking about tens of millions of dollars a year. For now, the Internet is the Information Superhighway."
At IBM, every computer line, from PCs to mainframes, is being readied to create information for viewing over the Web. Plus, Big Blue is counting on the Net as the basis of a new class of "networked" applications. In theory, they'll help reengineer entire business processes. One example: a corporate purchasing system, developed jointly with Coopers & Lybrand, that will automatically route electronic orders within a company and make sure they go to the appropriate managers for approval, then directly into the right supplier's computer.
RISING SUN. Like other computer makers, IBM sees its role as helping customers create new systems for the Net or at least forge Net connections. "There's no question that we want to put more focus on enabling people to put their services on the Internet," says Fernand B. Sarrat, general manager of the Networked Application Services Div. His lieutenant in the Net business, John R. Patrick, vice-president of Internet Applications, says the business of helping customers create Web sites is booming. "We're sold out," he says. "We can't keep up with demand."
For Sun, the Internet is a golden opportunity. It has already supplied about 56% of the Internet's servers. Just maintaining that share of the server market would be a huge business. But the company is attacking the Internet on several other fronts, including a prototype of an "interactive" Web browser that not only can jump from one page to another but also can launch small programs known as "applets." Such a setup would make it possible for two people in different locations to collaborate on a design project, for example.
The major emphasis, however, is on helping customers use the net for electronic commerce. "Think about how the postal system opened up commerce and how that profoundly changed business," says William J. Raduchel, vice-president for corporate planning and development. "The same thing is going to happen with the Internet." A big hang-up companies have about electronic commerce is network security, so Sun is working on a scheme to keep financial transactions secret on the Net. And, if its software for interactive Web browsing works as planned, Sun says its customers will be able to create TV-like home "pages" on the net. Embedded programs would be able to display video clips or other kinds of "live" action to lure consumers. "Is this going to sell a lot more Suns?" asks Schmidt. "Absolutely. It's a no-brainer."
Another no-brainer: Software makers must adapt to the Web. Within a year or two, industry executives predict, most PC packages--word-processing programs, spreadsheets, and operating systems--will be able to work across the Web. Lotus Notes, the leading "groupware" package for sharing information across large enterprises, is being made Web-compatible, for example. "The Web browser will quickly become a universal portal" into all information systems, says Jeff Crowe, president of Edify Corp., which sells an "agent" program that can be programmed to gather data from any kind of existing computer and deliver it via fax, E-mail, phone, or, soon, the Web.
Xerox Corp.'s software arm, XSoft, is working with Novell and others on a scheme called Document Enabled Networking. Using it, a Xerox machine at your local copy shop, for instance, could pull a document--a technical paper, say--from anywhere on the Web and print as many copies as you would like--for a fee the document's owner has established.
The Net will almost certainly change how software gets sold and delivered. Instead of shipping floppy disks or CD-ROMs, software companies will be able to advertise, take orders and payments, ship code, and deliver technical support directly into customers' computers over the Internet. That's what McAfee Associates, a supplier of antivirus software, and CyberSource Corp., a software distributor, are already doing.
CHEAP CHAT. Computer makers who don't get hip to the Net risk being left behind--as many were during the PC boom. For starters, no single maker of computers or software has the research and development budget to match the furious rate of innovation that is now taking place on the Internet. And once security issues are resolved, customers will try to move internal information systems onto Internet platforms. The economics will be too compelling to ignore: Even after customers start paying for actual usage rather than flat fees (box), it will be far cheaper to communicate over Internet than via any private network. That's because the Net aggregates traffic from so many users that it qualifies for the lowest possible phone rates. What's more, Internet traffic can ride over virtually any communications technology--so the Net can always take advantage of the cheapest links available.
While leveraging the Internet may be essential to a computer maker's survival, it isn't just a defensive play. As the Internet evolves, it's likely to take over your telephone, your fax machine, and maybe even your TV and stereo, too. Sure, the Information Superhighway is supposed to meld all these technologies into a torrential digital stream, too. But while the I-way remains a work in progress, the Internet offers a solid test-bed for advanced communications. Cornell University researchers, for example, have come up with software, called CUSeeMe, that transmits live video images between desktop computers--at the stuttering rate of five frames per second. "The Internet will become the arena for meeting, interaction, and conferencing of all kinds," says Ehud Shapiro, president of Internet startup Ubique.
Ubique, based in Israel and San Francisco, has developed software that mixes text, photos, drawings, and even VocalTec's digitized phone conversations to create "virtual places" on the Web. The idea is to help business people and others meet in a simulated room where they can share documents, exchange typewritten and spoken comments, and explore the rest of the Web together--with no time delay. To show off this concept, Ubique plans a virtual trade show where online attendees will be able to drop in at simulated booths, collect brochures, and even have private conversations with engineers there.
Such innovations are arriving at warp speed. Says Michael Goulde, senior consultant at Patricia Seybold Group, a software consulting firm: "New stuff is happening so fast it's almost impossible to keep up."
Lofty expectations are sending valuations of companies with promising Web technology into the stratosphere. Last fall, America Online paid $30 million for BookLink Technologies, which makes Web-browsing software--even though the company had yet to ship a finished product. On Mar. 13, CompuServe Inc., an AOL rival owned by H&R Block Inc., shelled out $100 million in cash and stock for Seattle's Spry Inc., a BookLink competitor whose market share is estimated at less than 10%. "I'm amazed that they'd pay that much," says Michael D. Harrigan, vice-president and general manager of the Internet Div. at Network Computing Devices Inc., which itself has just brought out its own browser, called Mariner. "It just shows that the Internet market is red-hot."
One thing that would cool it quickly is a turned-off public. And that's a real risk if it becomes too hard to find useful places to visit on the Net. InfoSeek, a startup in Santa Clara, Calif., is one of several companies tackling this problem. It has set up a server that maintains a subject and keyword index of all Web documents and a variety of other information sources from the Internet and news wires. Customers can run searches of the index, via the Web itself, as many as 100 times a month for a $9.95 monthly subscription fee. The system accepts "natural language" queries such as "What is the latest news about Afghanistan?" so no programming is required.
Just as important as finding information is dishing it out--a job for Web server software. While companies such as Sun, Silicon Graphics, and Netscape Communications are helping businesses create colorful Web pages on servers, it may take more to keep consumers coming back again and again, says Robert A. Olson, co-founder and president of Virtual Vineyard Inc. in Los Altos, Calif. Olson has written software that attempts to recreate the trusting relationships customers might develop with the knowledgeable owner of their local wine store. His system records and analyzes data about each customer's visit to the server. It tracks what each person looks at, his or her purchases, and so forth. Then, the next time that person visits, the machine can use that data to make appropriate recommendations and customized special offers.
Olson's Web server lets people compare their wine palates--using numerical scales for such criteria as fruitiness and bouquet--with that of the outfit's trained sommelier and co-founder, Peter Granoff. When there's a special offer to promote, the server can automatically send personalized E-mail to a selected list of customers, all signed "corkdork," which is Granoff's Internet I.D. Olson says he plans to license his server software to purveyors of other high-end "lifestyle" products.
In the Internet era, it will be just such services that keep the masses online--and the computer makers hopping. "This Internet thing is going to make the PC industry in 1982 look like a casual walk down a country lane. It's just going whoosh," says Charles Ferguson. He'd better hope he's right. A former Massachusetts Institute of Technology researcher and computer-industry pundit, Ferguson recently co-founded Vermeer Technologies Inc. in Cambridge to develop software for information services on the Web. If the Net can live up to its vast potential, his dream could come true.
The Biggest Thing Since the IBM PC?
The Internet ushers in a new era in computing's short but colorful history. Now, computers will serve as communication devices as well
as calculators and word processors. The Internet, global and universal,
offers the best of the past and a nearly limitless future.
Timesharing mainframe and minicomputer systems allow hundreds, sometimes thousands, of dumb terminals to share information and computing services. But terminals are expensive, communications slow, and software anything but user-friendly. Worse, proprietary designs make it painfully difficult to share information between systems.
The cheap, microprocessor-based PC brings computing power to the people. Open software stimulates a flood of imaginative applications. But the computing generally gets done in isolation, with only limited data. Local-area networks help users reach beyond their desktops, but only to other users and resources within their organizations.
The Internet, connecting millions of computers, offers a powerful new computing "platform" on which to build brand new computing applications. Because its software, including a scheme for electronic publishing called the World Wide Web, is open to all types of computers, the Net promises to wipe out technical and geographic hurdles that have been holding back the Information Revolution. The Internet is now the center of the computing universe.By John W. Verity in New York, with Robert D. Hof in San Francisco and bureau reports